Better risk appetite drives New Zealand bonds lower at close

The New Zealand government bonds closed lower Tuesday as investors moved away from safe-haven buying amid gains in riskier assets including equities and crude oil.

Also, Federal Reserve Chair Janet Yellen’s optimism on interest rate hike at the annual Jackson Hole Symposium on Friday supported the bond yields.

The yield on the benchmark 10-year bond rose 2-1/2 basis points to 2.265 percent and the yield on 7-year note ended 2-1/2 basis points higher at 1.970 percent and the yield on short-term 2-year note also bounced 3 basis points to 1.840 percent.

Moreover, the Kiwi bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of New Zealand's target. Crude oil prices rebound as the US dollar backed off a two-week high hit the day before. The International benchmark Brent futures rose 0.26 percent to $49.52 and West Texas Intermediate (WTI) jumped 0.89 percent to $47.30 by 05:30 GMT.

On Friday, At the Jackson Hole Symposium, Yellen said that the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.

She further added that in light of the continued solid performance of the labour market and the Fed’s outlook for economic activity and inflation the case for an increase in the federal funds rate has strengthened in recent months. However, Yellen furthered that of course, the Fed’s decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook.

In terms of recent economic data, New Zealand July building consents fell 10.5 percent m/m, from up 16.3 percent in June.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed up 20.69 points to 7,387.95.